Urban Edge Properties(UE) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - FFO as adjusted increased by 4% year-over-year for Q3 2025, with year-to-date growth at 7% compared to the first nine months of the previous year [4] - Same property net operating income (NOI) rose by 4.7% for the quarter and 5.4% year-to-date [4] - The company raised its 2025 FFO as adjusted guidance to a new range of $1.42 to $1.44 per share, representing 6% growth over 2024 at the midpoint [8][17] Business Line Data and Key Metrics Changes - Leasing activity totaled 31 deals aggregating 347,000 square feet, including 20 renewals at a 9% spread and 11 new leases at a 61% spread [9] - Same property lease rate stands at 96.6%, with a 20 basis point decline from the previous quarter [10] - Shop occupancy rate remained flat at 92.5%, while the overall same property NOI growth, including redevelopment guidance, was increased to a new midpoint of 5.25% [11][17] Market Data and Key Metrics Changes - The acquisition market remains competitive, driven by institutional capital and tighter spreads from traditional banks [7] - The company’s Boston portfolio now includes seven properties valued at approximately $5,500 million, representing about 10% of the company's total value [7] - The overall leasing market shows strong demand, with year-to-date leasing spreads averaging 40% on new leases and nearly 10% on renewals [8] Company Strategy and Development Direction - The company is focused on capital recycling, having acquired nearly $600 million of high-quality shopping centers at an average 7% cap rate while disposing of approximately $500 million of non-core assets at a 5% cap rate [7] - The active redevelopment pipeline totals $149 million with a projected yield of 15% [12] - The company aims to generate sustainable 3% plus growth through strategic acquisitions and dispositions [72] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of shopping center fundamentals, driven by favorable supply-demand dynamics and record low vacancy rates [8] - The company anticipates continued strong demand for retail space, particularly in the Northeast Corridor market [14] - Management highlighted the importance of maintaining a balance between restaurant and grocery tenants to ensure overall tenant success [56] Other Important Information - The company completed the acquisition of Brighton Mills, a grocery-anchored shopping center, for $39 million, expecting annual NOI growth to exceed 3% [4][5] - The company has a strong liquidity position of over $900 million, including $145 million in cash [16] Q&A Session Summary Question: Timeline for monetizing opportunities at Brighton Mills - Management indicated that most leases at Brighton Mills have terms extending over the next 10 to 22 years, with confidence in achieving over 3% NOI growth [22] Question: Breakdown of one-time items recognized in 2025 - Management highlighted approximately $2 million in one-time collections related to old receivables and about $1.5 million from CAM recovery billings as non-recurring items [24][25] Question: Opportunities at Shoppers World - Management discussed the flexibility to work with the Kohl's parcel separately and the potential for redevelopment or retenanting to enhance value [32] Question: Rent spreads in the quarter - Management noted that the 60% rent spread was driven by unique anchor leases with HomeGoods and Ross, and while double-digit spreads are expected, 60% is not sustainable every quarter [34][35] Question: Creating more shop space in the portfolio - Management is actively studying opportunities to split anchor spaces into shop spaces, with demand for shop space remaining strong [40][41] Question: Acquisition environment and funding - Management acknowledged a competitive acquisition market with increased interest from institutional capital, while maintaining a disciplined approach to bidding [46][48] Question: Institutional competition for nontraditional assets - Management noted that while there is interest in nontraditional shopping center assets, their platform allows them to differentiate and find value-add opportunities [52][53] Question: Balancing demand between restaurants and grocers - Management indicated that both sectors are in expansion mode, with no significant push-pull tension observed [56] Question: Shift in demand in the D.C. metro area - Management reported strong performance and demand in their D.C. centers, with no significant shifts in institutional capital interest noted [61] Question: Sustaining high occupancy levels - Management emphasized that supply-demand metrics favor sustained high occupancy levels due to limited new retail construction [67]